Preeffectuation Review (PER) of Favorable State Disability Determinations by the Social Security Administration (SSA) Fiscal Year (FY) 2003 Background

This annual report is submitted pursuant to section 221(c)(3)(C) of the Social Security Act (the Act). The Act requires the Commissioner of Social Security to report to the Committee on Ways and Means of the House of Representatives and to the Committee on Finance of the Senate on PERs conducted during the previous fiscal year. The Act requires the Commissioner to review at least 50 percent of all State Social Security Disability Insurance (SSDI) initial and reconsideration allowances and a sufficient number of continuing disability review (CDR) continuances to ensure a high level of accuracy in such determinations.

Initial and Reconsideration Allowances

The overall number of Title II and concurrent Title II/XVI initial and reconsideration allowances based on disability increased from 572,401 in FY 2002 to 594,776 in FY 2003. As a result, SSA reviewed 310,856 initial and reconsideration allowances in FY 2003 (52.3 percent of all allowances)--10,663 more cases than in FY 2002. The number of deficient cases returned to the States was 11,802 in FY 2003, and the return rate of these reviewed cases was 3.8 percent. After corrective action, it is estimated that 5,936 (or 1.9 percent) of the initial and reconsideration allowances would change to denials .

The number of initial allowances reviewed increased from 262,778 in FY 2002 to 267,977 in FY 2003. Of these cases reviewed in FY 2003, 10,333 (or 3.9 percent) were returned to the States. After corrective action, it is estimated that 5,146 (or 1.9 percent) of the initial allowances would change to denials.

SSA reviewed 70.1 percent of reconsideration allowances in FY 2003. The number of reconsideration allowances returned to the States was 1,469, and the return rate of these reviewed cases was 3.4 percent. After corrective action, it is estimated that 790 (or 1.8 percent) of the reconsideration allowances would change to denials.

It is important to note that these change rates are projections based on the results of corrective action on at least 95 percent of deficient PER cases; thus, the actual number could vary slightly from the projected number.

Of the 267,977 initial allowances reviewed, 127,244 were concurrent Title II/XVI allowances. Further, of the 42,879 reconsideration allowances reviewed, 21,855 were concurrent Title II/XVI allowances, for a total of 149,099 concurrent allowances reviewed.

Disability Continuance Determinations

In FY 2003, SSA reviewed 7,649 (or 3.6 percent) of the favorable CDR determinations compared to 10,490 (or 2.7 percent) in FY 2002. SSA returned 288 deficient CDR continuances (3.8 percent) in FY 2003, compared to 373 (or 3.6 percent) in FY 2002. After deficient continuances were corrected, it is estimated that 135 (or 1.8 percent) of the continuance determinations reviewed in FY 2003 would change to cessations. Of the 7,649 CDR continuances, 1,917 were concurrent Title II/XVI continuances.

Program Cost/Savings

Overall, SSA estimates savings with a total present value of $501 million in lifetime benefits as a result of the PER process. A breakdown of this estimate follows:

The cost of reviewing 310,856 allowances and 7,649 continuances was just over $42 million. SSA estimates that the prevention of incorrect allowances and continuances of FY 2003 cases will result in lifetime savings (after all appeals) of:

(1) a combined $349 million in cash benefits to the Federal Old-Age and Survivors Insurance Trust Fund and the Federal Disability Insurance Trust Fund (which includes cumulative net savings of almost $9 million from changing the date of disability onset in certain initial and reconsideration cases);

(2) $106 million to the Medicare trust funds;

(3) $20 million in Supplemental Security Income funds for concurrent cases; and

(4) $26 million in Medicaid funds for concurrent cases (see attachment). Therefore, reviews conducted in FY 2003 are expected to result in savings of approximately $12 for every dollar spent.

Accuracy of SSDI Allowances and Continuances

SSA found that the decision to allow or continue was correct in 98.1 percent of all State SSDI favorable disability determinations.

Analysis of FY 2003 Data

FY 2003 is the 7th year in which selections for PER were made through a profiling system that identifies cases more likely to be error-prone. FY 1997 was the first full year of profile usage. The FY 2003 workload is 125 percent of the FY 1997 workload, while the savings are 140 percent of FY 1997’s savings.

The larger universe of favorable determinations in FY 2003 compared to FY 2002, against which the 50-percent review requirement was applied, required more determinations to be reviewed. Additionally, more erroneous allowances were detected and corrected.

SSA reviewed 7,649 CDRs in FY 2003, a decrease of 2,841 cases from FY 2002. In FY 2003, the number of returns decreased, and the projected number of changed CDR decisions after all appeals also decreased, based on updated CDR appeals experience.

The net result is lifetime savings from PER in FY 2003 of $501 million, an increase of $35 million over the reported savings of $466 million in FY 2002.